EUROPEAN EQUITY UPDATE: Europe dips pre-ECB whilst US futures are caged in a tight range

Analysis details (09:34)

Equities in Europe kicked off the session on the backfoot as the pessimism reverberated from APAC, with sentiment overnight pressured as China tightened COVID curbs in two districts in Shanghai and Beijing. The Eurozone looks ahead to the ECB announcement and presser at 12:45BST/07:45EDT and 13:30BST/08:30EDT respectively, whereby policymakers are set to announce that purchases under APP will end as of July 1st and will likely confirm that rate hikes will commence at the July meeting (full Newsquawk preview available in the Research Suite). From an index perspective, the periphery markets could put some more focus on the wording in the ECB statement to underscore its commitment to avoiding fragmentation within the Eurozone. US equity futures trade flat in contained ranges with little in terms of a State-side docket aside from the weekly Jobless Claims data. Analysts at JPM have updated their fair value model and posit “There are some tentative signs that inflation volatility could be peaking, which would be consistent with markets continuing to look through the post-pandemic spike… For equities, looking through the spike in inflation vol implies a current fair value of 4400 for the S&P500.” Meanwhile, Citi on global equities suggests “The crowd remains more defensive in the US, while in Europe and Asia it remains aligned towards the commodities sectors and Financials”, as the bank highlights the Energy sector as the most crowded trade. European cash markets see relatively broad-based losses (Euro Stoxx 50 -0.6%; Stoxx 600 -0.7%), with sectors almost wholly in the red aside from Energy which ekes mild gains at the time of writing. Net-net, defensive sectors are more cushioned than some cyclicals. The marked sectoral laggard is the Basic Resources sector as base metals are hit by China’s COVID conundrum, whilst the inflation-prone Retail sector also sits towards the bottom. In terms of individual movers, Hochtief (-5%) is pressured following a capital increase. British American Tobacco (-0.8%) cut its FY global tobacco industry volume guidance, whilst separate reports suggested the UK tobacco review recommends increasing the age of sale from 18 by one year every year until, eventually, nobody can purchase a tobacco product in the UK – Imperial Brands (-2.0%) also sees losses. Moving on, Shell (+0.7%) is to reportedly receive two final offers this week for Nigerian onshore oil/gas fields, according to Bloomberg sources. First Group’s (-1.3%) board unanimously rejected proposals from I Squared Capital Advisors and said the offer is a significant undervaluation of the Co. Finally, Credit Suisse (-4.0%) is softer as it is reportedly "tapping" the brakes on its China expansion, whilst State Street said it's not going to respond to earlier reports regarding a takeover of Credit Suisse.

09 Jun 2022 - 09:34- EquitiesResearch Sheet- Source: Newsquawk